Wall Street skeptical about Northern Pass

In its second quarter earnings call on July 31, Northeast Utilities prepared investors for another possible delay in the Northern Pass timetable. The company still maintains that it expects to complete the new Coos route in the third quarter of 2012, begin construction in the second half of 2014 and complete the project in 2016. But Northeast also introduced new hedging language that if property purchases in Coos County were to be delayed into the fourth quarter of 2012, then the project in-service date would move back to early 2017.

Wall Street didn't buy it.

Bloomberg reported analyst Andrew Weisel's view that the "outlook for the company's transmission unit . . . is 'increasingly uncertain'," and, "given push back and problems in New Hampshire," he predicted an in-service date of late 2017 for Northern Pass.

There is new skepticism in the Wall Street community about Northeast Utilities' management of the Northern Pass project. The fact that the timetable keeps slipping harms the company's credibility. In asking a question during the call, analyst Michael Lapides referred to Northern Pass's routing and timetable as a "sort of TBD," meaning that the target keeps moving. The day after the call, Deutsche Bank downgraded NU's stock, citing "the potential for a delay of the Northern Pass Transmission Line" as a downside risk.

NU's highly confident language of past calls was absent.

When asked by an analyst about Hydro-Quebec's level of continued interest in Northern Pass, NU's response was oblique. Rather than a direct answer such as "Hydro-Quebec remains fully committed to Northern Pass and top management confirmed this prior to today's call," NU cited a recent ISO-NE study about over-reliance on natural gas for electricity generation in New England and suggested that the related reliability concerns and need for diversity will make for a more attractive market for Hydro-Quebec. This may well be true, but it sounded like NU was trying to convince HQ of the project's attractiveness. If Hydro-Quebec remains fully committed to Northern Pass, one would have expected a simple, clear answer to that effect.

Northeast Utilities has yet to hear a question from analysts about its repeated assertion that it owns all the land rights it needs on the lower 140 miles of the proposed route. When analysts come to understand that Northern Pass faces perhaps the highest regulatory hurdle of the project in its effort to cross the White Mountain National Forest and the Appalachian Trail, where it does not, in fact, have existing rights-of-way, look for even more doubt from Wall Street.